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Here's Why You Should Hold Pentair (PNR) Stock in Portfolio
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Pentair (PNR - Free Report) has been benefiting from pricing actions, cost-cutting initiatives and progress on its Transformation initiatives, which have helped it to offset the impact of inflated costs on its margins. The ongoing momentum in the Industrial and Flow Technologies, and Water Solutions segments has helped offset the impact of low volumes in the pool business on its results.
Focus on product introductions, acquisitions and investments, which are in sync with its strategy to expand in the areas of pool, and residential and commercial water treatment, will continue to aid growth.
Pentair currently carries a Zacks Rank #3 (Hold).
Shares of the company have gained 58.1% in a year compared with the industry’s 9% growth. The Zacks Industrial Products sector has gained 19.4% and the S&P 500 composite has risen 17.6% in the same time frame.
Image Source: Zacks Investment Research
Transformation Initiatives, Pricing to Aid 2023 Results
Pentair’s pool business has been witnessing low demand lately. The ongoing inventory correction has also been weighing on the pool segment’s results. Despite this, Pentair delivered 2.9% growth in overall sales in the first quarter of 2023, followed by 2% growth in the second quarter. It has also delivered margin expansion across all three segments.
Results were aided by improved performances in the Industrial and Flow Technologies and Water Solutions segments, benefits from pricing, cost-cutting initiatives and progress on its Transformation initiatives.
The company expects the channel inventory correction in the Pool business to be completed by the end of the third quarter. Gains from the transformation initiatives are also expected to accelerate. These factors, along with pricing actions and gains from the Manitowoc Ice acquisition, will help offset the impact of higher costs and low pool volumes on the company’s results.
Pentair now expects adjusted earnings per share to be in the range of $3.65 to $3.75 for 2023. The company had reported adjusted earnings per share of $3.68 in 2022. Our model projects adjusted earnings per share to be $3.72 for 2023, suggesting 1% year-over-year growth.
Upward Revision in Estimates
The Zacks Consensus Estimate for PNR’s earnings for 2023 has moved up 1% over the past 30 days and is currently pegged at $3.71 per share. The consensus mark for 2024 earnings has also seen a northward revision of 2% to $4.23 per share.
Demand Prospects Look Solid
Even though the pool business is currently bearing the brunt of weak demand and ongoing inventory correction, it is expected to eventually pick up. The company estimates that the pool industry in North America is catering to a large installed base of approximately 5.4 million pools, with the average age of these pools being 20-25 years.
Around 60% of the industrial demand is for repairing, 20% for major remodeling and 20% for new pools, Pentair is well-poised to gain from these demand trends in the long term. Also, given that half of the installed pools lack any form of automation, the growing preference for more autonomous and energy-efficient pools will benefit the company as well.
Strategic Initiatives to Aid Growth
Pentair is focused on expanding digital transformation, innovation, technology and brand building. The company has a strong product pipeline. It is also expanding in the areas of pool and residential and commercial water treatment through acquisitions. To this end, Pentair completed the acquisition of Manitowoc Ice, a leading provider of commercial ice makers.
Pentair has embarked on a Transformation program to accelerate growth and drive margin expansion. The program is structured in multiple phases and is expected to drive operational efficiency, streamline processes, reduce complexity while meeting financial objectives. The company is targeting to make its return on sales to be around 23% by 2025, through the program, from the 18.6% return on sales in 2022. It will also be using automation to increase productivity.
Solid Balance Sheet Bodes Well
Over the past five years, the company has generated a cumulative free cash flow of more than $2 billion. The company has a long-term target to consistently generate free cash flow, which is greater than the 100% conversion of its net income. Its total debt-to-total capital ratio stood at 0.42 at the end of second-quarter 2023. It has no significant long-term debt maturing in the next five years. Pentair's times interest earned was 6.1.
Caterpillar has an average trailing four-quarter earnings surprise of 18.5%. The Zacks Consensus Estimate for CAT’s 2023 earnings is pegged at $19.81 per share. The consensus estimate for 2023 earnings has moved 11.4% north in the past 60 days. Its shares have gained 51.6% in the last year.
Astec has an average trailing four-quarter earnings surprise of 20%. The Zacks Consensus Estimate for ASTE’s 2023 earnings is pegged at $2.81 per share. The consensus estimate for 2023 earnings has moved 4% north in the past 60 days. ASTE’s shares have gained 22.8% in the last year.
The Zacks Consensus Estimate for Eaton’s 2023 earnings per share is pegged at $8.80. The consensus estimate for 2023 earnings has moved 4% north in the past 60 days. It has a trailing four-quarter average earnings surprise of 3%. Shares of ETN have rallied 68.8% in the last year.
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Here's Why You Should Hold Pentair (PNR) Stock in Portfolio
Pentair (PNR - Free Report) has been benefiting from pricing actions, cost-cutting initiatives and progress on its Transformation initiatives, which have helped it to offset the impact of inflated costs on its margins. The ongoing momentum in the Industrial and Flow Technologies, and Water Solutions segments has helped offset the impact of low volumes in the pool business on its results.
Focus on product introductions, acquisitions and investments, which are in sync with its strategy to expand in the areas of pool, and residential and commercial water treatment, will continue to aid growth.
Pentair currently carries a Zacks Rank #3 (Hold).
Shares of the company have gained 58.1% in a year compared with the industry’s 9% growth. The Zacks Industrial Products sector has gained 19.4% and the S&P 500 composite has risen 17.6% in the same time frame.
Image Source: Zacks Investment Research
Transformation Initiatives, Pricing to Aid 2023 Results
Pentair’s pool business has been witnessing low demand lately. The ongoing inventory correction has also been weighing on the pool segment’s results. Despite this, Pentair delivered 2.9% growth in overall sales in the first quarter of 2023, followed by 2% growth in the second quarter. It has also delivered margin expansion across all three segments.
Results were aided by improved performances in the Industrial and Flow Technologies and Water Solutions segments, benefits from pricing, cost-cutting initiatives and progress on its Transformation initiatives.
The company expects the channel inventory correction in the Pool business to be completed by the end of the third quarter. Gains from the transformation initiatives are also expected to accelerate. These factors, along with pricing actions and gains from the Manitowoc Ice acquisition, will help offset the impact of higher costs and low pool volumes on the company’s results.
Pentair now expects adjusted earnings per share to be in the range of $3.65 to $3.75 for 2023. The company had reported adjusted earnings per share of $3.68 in 2022. Our model projects adjusted earnings per share to be $3.72 for 2023, suggesting 1% year-over-year growth.
Upward Revision in Estimates
The Zacks Consensus Estimate for PNR’s earnings for 2023 has moved up 1% over the past 30 days and is currently pegged at $3.71 per share. The consensus mark for 2024 earnings has also seen a northward revision of 2% to $4.23 per share.
Demand Prospects Look Solid
Even though the pool business is currently bearing the brunt of weak demand and ongoing inventory correction, it is expected to eventually pick up. The company estimates that the pool industry in North America is catering to a large installed base of approximately 5.4 million pools, with the average age of these pools being 20-25 years.
Around 60% of the industrial demand is for repairing, 20% for major remodeling and 20% for new pools, Pentair is well-poised to gain from these demand trends in the long term. Also, given that half of the installed pools lack any form of automation, the growing preference for more autonomous and energy-efficient pools will benefit the company as well.
Strategic Initiatives to Aid Growth
Pentair is focused on expanding digital transformation, innovation, technology and brand building. The company has a strong product pipeline. It is also expanding in the areas of pool and residential and commercial water treatment through acquisitions. To this end, Pentair completed the acquisition of Manitowoc Ice, a leading provider of commercial ice makers.
Pentair has embarked on a Transformation program to accelerate growth and drive margin expansion. The program is structured in multiple phases and is expected to drive operational efficiency, streamline processes, reduce complexity while meeting financial objectives. The company is targeting to make its return on sales to be around 23% by 2025, through the program, from the 18.6% return on sales in 2022. It will also be using automation to increase productivity.
Solid Balance Sheet Bodes Well
Over the past five years, the company has generated a cumulative free cash flow of more than $2 billion. The company has a long-term target to consistently generate free cash flow, which is greater than the 100% conversion of its net income. Its total debt-to-total capital ratio stood at 0.42 at the end of second-quarter 2023. It has no significant long-term debt maturing in the next five years. Pentair's times interest earned was 6.1.
Stocks to Consider
Some better-ranked stocks from the Industrial Products sector are Caterpillar Inc. (CAT - Free Report) , Astec Industries, Inc. (ASTE - Free Report) and Eaton Corporation plc. (ETN - Free Report) . CAT and ASTE sport a Zacks Rank #1 (Strong Buy), and ETN has a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Caterpillar has an average trailing four-quarter earnings surprise of 18.5%. The Zacks Consensus Estimate for CAT’s 2023 earnings is pegged at $19.81 per share. The consensus estimate for 2023 earnings has moved 11.4% north in the past 60 days. Its shares have gained 51.6% in the last year.
Astec has an average trailing four-quarter earnings surprise of 20%. The Zacks Consensus Estimate for ASTE’s 2023 earnings is pegged at $2.81 per share. The consensus estimate for 2023 earnings has moved 4% north in the past 60 days. ASTE’s shares have gained 22.8% in the last year.
The Zacks Consensus Estimate for Eaton’s 2023 earnings per share is pegged at $8.80. The consensus estimate for 2023 earnings has moved 4% north in the past 60 days. It has a trailing four-quarter average earnings surprise of 3%. Shares of ETN have rallied 68.8% in the last year.